Chapter 12: Some Lessons from Capital Market History
Concept Questions
3.
Risk and Return: We have seen that over long periods, stock investments have
tended to substantially outperform bond investments. However, it is common to
observe investors with lon
Chapter 8: Stock Valuation
Concept Questions
4.
Dividend Growth Model: Under what two assumptions can we use the dividend
growth model presented in the chapter to determine the value of a share of stock?
Comment on the reasonableness of these assumptions.
Chapter 6: Discounted Cash Flow Valuation
1.
Present Value and Multiple Cash Flows: Seaborn Co. has identified an
investment project with the following cash flows. If the discount rate is 10
percent, what is the present value of these cash flows? What is
Chapter 14: Cost of Capital
Concept Questions:
4.
WACC and Taxes: Why do we use an after-tax figure for cost of debt but not for
cost of equity?
Interest expense is tax-deductible while dividends are paid in after-tax dollars.
Therefore, there is no diffe
Chapter 01 Introduction to Financial Management Answer Key
Multiple Choice Questions
1. Tim has been promoted and is now in charge of all fixed asset purchases. In other words,
Tim is in charge of:
A. capital structure management.
B. asset allocation.
C.
Chapter 12
Problems 1-21
Input boxes in tan Output boxes in yellow Given data in blue Calculations in red Answers in green
Chapter 12
Question 1 Input area:
Initial price Dividend paid Ending share price
$64 1.75 72
Output area:
Total return
=
15.23%
Chap
Chapter 4
Problems 1-30
Input boxes in tan Output boxes in yellow Given data in blue Calculations in red Answers in green
Chapter 4
Question 1,2 Input area: Sales Costs Assets Debt Equity Sales increase Output area: Pro forma income statement Sales $17,60
Chapter 21
Problems 1-19, Appendix 1-5
Input boxes in tan Output boxes in yellow Given data in blue Calculations in red Answers in green
Chapter 21
Question 1 Input Area: Units Unit price Terms Net Output Area: a. Days until account is overdue Remittance
Chapter 18
Problems 1-18
Input boxes in tan Output boxes in yellow Given data in blue Calculations in red Answers in green
Chapter 18
Question 1 Input Area:
Dividend per share Tax rate Price
$6.00 15% $80
Output Area:
After-tax Dividend Ex-dividend price
Chapter 17
Problems 1-21
Input boxes in tan Output boxes in yellow Given data in blue Calculations in red Answers in green
Chapter 17
Question 1 Input Area:
Market value EBIT Debt issue Interest rate Shares outstanding Expansion-EBIT Recession-EBIT
$150,0
Chapter 10
Problems 1-27
Input boxes in tan Output boxes in yellow Given data in blue Calculations in red Answers in green
Chapter 10
Question 1 Input area:
Purchase price Appraised value Cost to build Grading costs
$5,000,000 5,400,000 10,400,000 650,000
Chapter 16
Problems 1-15
Input boxes in tan Output boxes in yellow Given data in blue Calculations in red Answers in green
Chapter 16
Question 1 Input Area:
Shares outstanding Price New shares New price
350,000 $85.00 70,000 $70.00
Output Area:
a. b. c. d
Chapter 13
Problems 1-27
Input boxes in tan Output boxes in yellow Given data in blue Calculations in red Answers in green
Chapter 13
Question 1 Input area:
Shares of A Share price of A Shares of B Share price of B
70 $40.00 110 $22.00
Output area:
Weight
Chapter 9
Problems 1-23
Input boxes in tan Output boxes in yellow Given data in blue Calculations in red Answers in green
A 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19
B
C
D
E
Chapter 9
Question 1 Input area:
Year 0 1 2 3 4
Cash flow $(4,800) 1,200 2,
Chapter 15
Problems 1-23
Input boxes in tan Output boxes in yellow Given data in blue Calculations in red Answers in green
Chapter 15
Question 1 Input Area:
Dividend per share Growth rate Stock price
$2.45 6% $45
Output Area:
Cost of equity
11.77%
Chapter
Chapter 2
Problems 1-26
Input boxes in tan
Output boxes in yellow
Given data in blue
Calculations in red
Answers in green
Chapter 2
Question 1
Input area:
Current assets
Net fixed assets
$
5,000
23,000
Current liabilities
Long-term debt
$
4,300
13,000
Out
CriticshavechargedthatcompensationtotopmanagementintheUnitedStatesissimplytoohighand
shouldbecutback.Ifcompensationistiedtoperformance,shouldtherebeaceilingonanexecutives
earnings?Explainatleasttwoprosandtwoconsoflimitingexecutivecompensation?
Of course t
A commonly cited business goal is profit maximization. Why is this not the most precise goal of
financial management? Referencing a real-life example, why should a corporation not do anything and
everything to maximize owners wealth?
Profit maximization i
Chapter 6
Problems 1-75
Input boxes in tan Output boxes in yellow Given data in blue Calculations in red Answers in green
Chapter 6
Question 1 Input area: Output area: Discount rate Year 1 2 3 4 24% Cash flow $1,200 600 855 1,480 $2,432.40
Chapter 6
Quest
Case Solutions
Cases 1,2,4,5,7
Input boxes in tan
Output boxes in yellow
Given data in blue
Calculations in red
Answers in green
Case #1 - Cash Flows and Financial Statements at Sunset Boards
Input area:
Cost of goods sold
Cash
Depreciation
Interest expen
Chapter 7
Problems 1-32
Input boxes in tan
Output boxes in yellow
Given data in blue
Calculations in red
Answers in green
Chapter 7
Question 1
Input area:
Coupon
Required rate of return
10%
8%
Output area:
The yield to maturity is the required rate of ret
Chapter 8
Problems 1-22
Input boxes in tan Output boxes in yellow Given data in blue Calculations in red Answers in green
Chapter 8
Question 1 Input area: Dividend paid Dividend growth rate Required return # of years $1.40 6% 12% 0
Output area: Price $24.
Chapter 5
Problems 1-20
Input boxes in tan Output boxes in yellow Given data in blue Calculations in red Answers in green
Chapter 5
Question 1 Input area: Interest rate Deposit # of years Output area: Compound interest Simple interest Difference = $9,835.
Chapter 3
Problems 1-30
Input boxes in tan
Output boxes in yellow
Given data in blue
Calculations in red
Answers in green
Chapter 3
Question 1
Input area:
Net working capital
Current liabilities
Inventory
$ 1,320
4,460
1,875
Output area:
Current assets
$
Chapter 11
Problems 1-28
Input boxes in tan Output boxes in yellow Given data in blue Calculations in red Answers in green
Chapter 11
Question 1 Input area:
Variable material cost Variable labor cost b. Fixed costs Production c. Sales price Depreciation
$
Chapter 26
Problems 1-10
Input boxes in tan
Output boxes in yellow
Given data in blue
Calculations in red
Answers in green
Chapter 26
Question 1-5
Input Area:
Cost
Life of machine
Lease price
Borrowing rate
Tax rate
$
$
3,000,000
4
895,000
8%
35%
Output A
Chapter 5: Introduction to Valuation: The Time Value of Money
1.
Simple Interest versus Compound Interest: First City Bank pays 8 percent
simple interest on its savings account balances, whereas Second City Bank pays 8
percent interest compounded annually
Chapter 7: Interest Rates and Bond Valuation
Concept Questions
1.
Treasury Bonds: Is it true that a U.S. Treasury security is risk-free?
No! A truly risk-free security is one that is devoid of any risk, i.e., a security that
has no potential for loss. Suc
Lecture 4 Notes: Financial Statement Analysis Part 1
Ratio, Trend, Common-Size, and Industry Comparison Analyses
Introduction
We have all seen financial wizards and computer geeks in the movies who can take a companys
financial statements apart in minutes
Book Notes
Chapter 1
What is corporate finance?
The study of ways to answer the following 3 questions:
What long-term investments should you take on?
Where will you get the long-term financing to pay for your investment?
How will you manage your ever